Seychelles launches World First Sovereign Blue Bond

Seychelles launches World First Sovereign Blue Bond

The Republic of Seychelles, an archipelago nation consisting of 115 granite and coral islands, has launched the World’s First Sovereign Blue Bond—a pioneering financial instrument designed to support sustainable marine and fisheries projects.

The pioneering financial instrument was launched with a focus on the emerging new “Blue Economy” underlining the protection and preservation of the world’s heavily-exploited oceans.

The bond which has raised US$15 million from international investors, demonstrates that institutional investors can become involved in helping to build a truly sustainable blue economy that supports critical marine ecosystems while providing economic prosperity for local communities and Island Developing States.

The Seychelles Blue Bond is partially guaranteed by a US$5 million guarantee from the World Bank (IBRD) and further supported by a US$5 million concessional loan from the GEF which will partially cover interest payments for the bond.

Proceeds from the bond will also contribute to the World Bank’s South West Indian Ocean Fisheries Governance and Shared Growth Program, which supports countries in the region to sustainably manage their fisheries and increase economic benefits from their fisheries sectors.

Origin of Blue Bond Concept :-

The concept for a Seychelles Blue Bond to support the island nation’s transition to sustainable fisheries was conceived in 2014 by The Prince of Wales’ International Sustainability Unit.

Why Seychelles need Blue Bonds ?

  • Marine resources are critical to the country’s economic growth. After tourism, the fisheries sector is the country’s most important industry, contributing significantly to annual Gross Domestic Product (GDP) and employing 17 percent of the population.
  • Fish products make up around 95 percent of the total value of domestic exports.
  • The Seychelles is home to numerous beaches, coral reefs and nature reserves, as well as rare animals such as giant Aldabra tortoises.
  • The Seychelles has a land area of 455 square km spread across an Exclusive Economic Zone of approximately 1.4 million square km. As one of the world’s biodiversity hotspots.

Seychelles is balancing the need to both develop economically and protect its natural endowment.

Seychelles progress in preserving its Marine Area :-

  • In February, Seychelles gave details on the first 2,10,000 square kilometre area to be conserved, limiting activities like fishing, oil exploration and large-scale development in the most fragile habitats, while allowing them under certain conditions in the rest of the area.
  • The archipelago (group of islands) of fewer than 1,00,000 people mainly relies on tourism and fishing for revenue, but in recent years oil and gas companies have been exploring its turquoise waters, home to dugongs, turtles and tuna.
  • Seychelles, rich in underwater reefs and postcard-perfect beaches, defaulted on its debt in 2008 and clawed its way back to prosperity with assistance from the International Monetary Fund.
  • Government officials have since been searching for ways to preserve their environment without endangering financial stability.
  • In February, it said it had reached an agreement with US-based conservation group The Nature Conservancy to buy up nearly 22 million dollars of Seychelles’ outstanding 406 million-dollar sovereign debt in return for the country designating a third of its marine area as ‘protected’.

How Blue Bond will help Seychelles & preserving its marine resources?

  • The bond demonstrates the potential for countries to harness capital markets for financing the sustainable use of marine resources.
  • The World Bank assisted in developing the Blue Bond and reaching out to the three investors :
    Calvert Impact Capital
    Nuveen
    U.S. Headquartered Prudential Financial, Inc
  • Proceeds from the bond will include :-
    Support for the expansion of marine protected areas
    Improved governance of priority fisheries
    development of the Seychelles’ blue economy.

Where will the money raised from the blue bond go ?

At least 12 million dollars of the proceeds will be allocated for low-interest loans and grants to local fishermen communities, while the remainder will finance research on sustainable fisheries projects.Grants and loans will be provided through the Blue Grants Fund and Blue Investment Fund, managed respectively by the Seychelles’ Conservation and Climate Adaptation Trust (SeyCCAT) and the Development Bank of Seychelles (DBS).

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